Activist Rethinks Hard-Hitting Proxy

Philip Goldstein, closed-end fund activist and principal of Opportunity Partners, a private investment partnership of Pleasantville, N.Y., said he wants to tone down a proxy he filed late last month in which he implies that members of a Dresdner fund board are too old and too rich to represent shareholder interests.

Two days after filing the critical proxy, Goldstein said he has had a change of heart regarding the filing pertaining to the $90 million Dresdner RCM Global Strategic Income Fund. The fund is managed by Dresdner RCM Global Investors of San Francisco.

Goldstein, who owns 700,000 shares of the fund, said in a telephone interview that he has decided to tone down the accusations he originally made although he is committed to furthering the issues he raised in the proxy he filed with the SEC Aug. 28.

"I am going to tone it down and stick to the issues," said Goldstein.

In the proxy, Goldstein charged that the board of directors of the fund is out of touch with the interests of shareholders because board members are unwilling to allow the fund to be opened and investors to liquidate their holdings at net asset value.

The fund suffered a double-digit discount of 19.3 percent as of the end of last year, virtually unchanged from a year earlier, according to public filings made on behalf of the fund in April.

Goldstein also said that three of the fund's directors own no shares of the fund, despite having collected $100,000 in directors' fees for their board service. Goldstein further said that three fund directors do not reside in the Unites States and that all but one of the board members are over the age of 70. Goldstein described the directors as being in their "twilight years," in the proxy.

Goldstein also questioned what he implied was the board members' lack of approachability and commitment to fund shareholders.

"One [director] is known only as The Earl of Limerick. And, the Chairman of the Board is an 84-year old former Australian diplomat who goes by the title Sir'," said Goldstein in the proxy. "Could it be that the directors are so enamored with their titles and prestige that they are out of touch with the shareholders?"

Goldstein asks shareholders in the proxy to vote to open the fund and elect him and two others to the fund's board of directors. If elected, he and the two other nominees would seek to pressure the full board to open the fund, the proxy said.

But, two days after he filed the proxy, Goldstein said he had rethought the tone of his accusations. He plans to "take out all the personal stuff - anything that could be considered a personal attack," when he files a revised proxy, following SEC review of the preliminary proxy, he said.

But, while he feels the language he used in the proxy was extreme, he continues to believe in the concerns raised, he said.

"I think it's a legitimate issue that six of the seven directors are over age 70," he said.

The board is composed of hard-working, dedicated professionals who refuse to give in to the needs of one shareholder while sacrificing the needs of others, said Luke Knecht, president of the fund, in an interview.

"Shareholders bought this fund because they wanted the income, not the quick pop in realizing net asset value," said Knecht, who is also manager of the Dresdner fund.

Knecht disagrees with Goldstein's characterizations of board members.

"These are devoted, caring people," said Kneckht. "This board is in no way detached from the interests or viewpoints of shareholders. We regret Phil's inference that they are perhaps only here because of any title or desire to relax. They all work hard on behalf of the fund."

He said the "Earl of Limerick" is the proper title for board member Patrick Limerick, who is the chairman of Pirelli Tires in London. The deputy chairman of the fund's board is G. William Miller, former chairman of the Federal Reserve.

"None of these gentlemen have been sitting on their estates counting their sheep," said Knecht.

Knecht also said it makes sense that three of the directors, including the fund's board chairman, Sir Robert C. Cotton, and Leonard T. Hinde, live outside the U.S., in Australia, because through the latter part of last year, the fund invested virtually all of its assets in Australian and New Zealand high-grade bonds.

The Dresdner RCM Global Strategic Income Fund actually began as a closed-end fund in November 1986 as the Kleinwort Benson Australian Income Fund. But according to public fund documents, in late 1998, the fund's board of directors began considering shifting the fund to allow it to invest in a broader range of fixed-income securities from a more diverse geographical base, including emerging markets.

"The board had watched the original premise play out over the years and had seen the mission of the fund, as originally conceived, as not viable anymore," said Knecht. So the board decided to suggest restructuring the fund, he said.

On Oct. 26 of last year, shareholders approved broadening the fund's mandate and the fund became the Dresdner RCM Global Strategic Income Fund. Since then, the fund has done extremely well, and has three times raised its dividend payments, said Knecht. Year-to-date through July 31 - the latest available figures - the fund was up 4.71 percent, according to Wiesenberger/Thomson Financial.

Still, Goldstein wants to leave it to fund shareholders to decide if they should be allowed to get out of the fund, at the higher net asset value that opening the fund would potentially allow.